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Amazon (AMZN) Up 30.1% YTD on Retail Strength: Should You Buy?
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Amazon (AMZN - Free Report) has experienced a 30.1% surge in its stock price year to date (YTD), outperforming the Zacks Internet – Commerce industry and S&P 500 index, which have returned 21.5% and 16.7%, respectively. The e-commerce giant achieved a milestone by exceeding the market capitalization of $2 trillion late last month for the first time, currently standing at $2.06 trillion as of Jul 3.
The company is witnessing growing investor confidence in its cloud business, generative AI capabilities and most importantly its retail business, which contributes the most to its revenues.
Amazon’s e-commerce dominance, driven by solid Prime momentum, is the primary growth factor behind the success of its retail business. Its distribution strength, expanding fulfillment network, ultrafast deliveries via drones and momentum in cashierless technology are other positives.
A strong global footprint, along with meaningful progress in emerging geographies like India, Brazil, Australia, Mexico, the Middle East and Africa, is a plus.
AMZN’s Year-to-Date Price Performance
Image Source: Zacks Investment Research
Prime Momentum Boosts E-commerce Strength
Amazon’s solid Prime momentum, thanks to Prime benefits, including a strong loyalty system, customer-friendly offers, quick grocery delivery services and robust Prime Free One-Day and Prime Free Same-Day Delivery services, are constantly driving its growth in the booming e-commerce market, which, as per a report from IMARC Group, is expected to hit $183.8 trillion by 2032 by registering a CAGR of 27.2% over a period of 2024-2032.
Strengthening relationships with third-party sellers on the company’s e-commerce platform is a major positive for its online retail business.
Growing momentum in ‘Buy with Prime’ on the back of strategic partnerships with Salesforce (CRM - Free Report) and Shopify (SHOP - Free Report) is helping the company gain solid traction among various merchants.
AMZN’s offering of same-day delivery of groceries ordered under the Fresh category of its platform is boosting customer engagement further. With Prime, customers also enjoy access to unlimited grocery delivery on orders above $35 from Whole Foods Market, Amazon Fresh, and other local grocery and specialty stores.
Growing pharma business on the back of Prime perks is noteworthy. It offers RxPass, a Prime membership benefit, which enables Prime members to receive all of their eligible medications for one flat monthly fee of $5 and get them delivered for free.
The company also recently expanded its same-day medication delivery service to New York City and Los Angeles in a bid to bolster its online pharmacy retail business, Amazon Pharmacy. It intends to expand the same to over a dozen cities in the United States by the end of this year.
Coming to other perks, Amazon recently partnered with Grubhub to include Grubhub+ as an ongoing Prime membership offer. Prime members can place food orders from various restaurants across 50 states in the country with Grubhub directly on Amazon.com and in the Amazon Shopping app.
Moreover, Prime members enjoy the expanding library of original content, regional content and sports content portfolio on Prime Video with their Prime subscription.
E-commerce benefits, coupled with online streaming perks, are aiding growth in the Prime subscriber base, which, in turn, is driving Amazon’s subscription revenue growth. In the first quarter of 2024, Amazon witnessed 11% growth in its subscription services sales, which stood at $10.72 billion.
Growing Offline Stores Aid Competitive Position
Amazon’s expanding presence in the offline retail space on the back of an increasing number of Fresh and Whole Foods stores is helping it to compete well with retail behemoths like Walmart (WMT - Free Report) , Target and Costco, to name a few.
It recently inaugurated its second Amazon Fresh store in New Jersey. It is also set to open another Amazon Fresh store in Virginia.
Amazon gears up to launch a smaller Whole Foods Market concept called Whole Foods Market Daily Shop in Manhattan.
Its introduction of the smart shopping cart, called Amazon Dash Cart, powered by advanced computer vision technology, to deliver an enhanced shopping experience to its in-store shoppers, is a plus.
The growing traction across Amazon Go, which is a cashierless store of the company, is a major positive.
Conclusion
Amazon’s near-term as well as long-term prospects are expected to benefit from strong retail strategies, which include bolstering its online and offline retail presence, distribution channels and delivery services. Also, expanding global presence and growing adoption of its Prime program remains a major positive.
This Zacks Rank #2 (Buy) company enjoys high market esteem, and savvy investors should consider leveraging AMZN’s potential for sustained long-term growth. It has an impressive long-term expected earnings growth rate of 29.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for 2024 revenues is pegged at $638.24 billion, which indicates a year-over-year increase of 11%. The consensus mark for 2024 earnings has been revised upward by 0.9% to $4.58 per share over the past 60 days. The figure indicates year-over-year growth of 57.9%.
EPS Movement Chart
Image Source: Zacks Investment Research
However, AMZN is trading at a premium with a forward 12-month P/S of 3.05X compared with the industry’s 1.65X and higher than the median of 2.49X, reflecting a stretched valuation. While this might be perceived as a risk, the premium is justified due to the company’s strong capabilities in various fields and high growth potential compared to traditional retailers.
AMZN’s P/S F12M Ratio Graph
Image Source: Zacks Investment Research
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Amazon (AMZN) Up 30.1% YTD on Retail Strength: Should You Buy?
Amazon (AMZN - Free Report) has experienced a 30.1% surge in its stock price year to date (YTD), outperforming the Zacks Internet – Commerce industry and S&P 500 index, which have returned 21.5% and 16.7%, respectively. The e-commerce giant achieved a milestone by exceeding the market capitalization of $2 trillion late last month for the first time, currently standing at $2.06 trillion as of Jul 3.
The company is witnessing growing investor confidence in its cloud business, generative AI capabilities and most importantly its retail business, which contributes the most to its revenues.
Amazon’s e-commerce dominance, driven by solid Prime momentum, is the primary growth factor behind the success of its retail business. Its distribution strength, expanding fulfillment network, ultrafast deliveries via drones and momentum in cashierless technology are other positives.
A strong global footprint, along with meaningful progress in emerging geographies like India, Brazil, Australia, Mexico, the Middle East and Africa, is a plus.
AMZN’s Year-to-Date Price Performance
Image Source: Zacks Investment Research
Prime Momentum Boosts E-commerce Strength
Amazon’s solid Prime momentum, thanks to Prime benefits, including a strong loyalty system, customer-friendly offers, quick grocery delivery services and robust Prime Free One-Day and Prime Free Same-Day Delivery services, are constantly driving its growth in the booming e-commerce market, which, as per a report from IMARC Group, is expected to hit $183.8 trillion by 2032 by registering a CAGR of 27.2% over a period of 2024-2032.
Strengthening relationships with third-party sellers on the company’s e-commerce platform is a major positive for its online retail business.
Growing momentum in ‘Buy with Prime’ on the back of strategic partnerships with Salesforce (CRM - Free Report) and Shopify (SHOP - Free Report) is helping the company gain solid traction among various merchants.
AMZN’s offering of same-day delivery of groceries ordered under the Fresh category of its platform is boosting customer engagement further. With Prime, customers also enjoy access to unlimited grocery delivery on orders above $35 from Whole Foods Market, Amazon Fresh, and other local grocery and specialty stores.
Growing pharma business on the back of Prime perks is noteworthy. It offers RxPass, a Prime membership benefit, which enables Prime members to receive all of their eligible medications for one flat monthly fee of $5 and get them delivered for free.
The company also recently expanded its same-day medication delivery service to New York City and Los Angeles in a bid to bolster its online pharmacy retail business, Amazon Pharmacy. It intends to expand the same to over a dozen cities in the United States by the end of this year.
Coming to other perks, Amazon recently partnered with Grubhub to include Grubhub+ as an ongoing Prime membership offer. Prime members can place food orders from various restaurants across 50 states in the country with Grubhub directly on Amazon.com and in the Amazon Shopping app.
Moreover, Prime members enjoy the expanding library of original content, regional content and sports content portfolio on Prime Video with their Prime subscription.
E-commerce benefits, coupled with online streaming perks, are aiding growth in the Prime subscriber base, which, in turn, is driving Amazon’s subscription revenue growth. In the first quarter of 2024, Amazon witnessed 11% growth in its subscription services sales, which stood at $10.72 billion.
Growing Offline Stores Aid Competitive Position
Amazon’s expanding presence in the offline retail space on the back of an increasing number of Fresh and Whole Foods stores is helping it to compete well with retail behemoths like Walmart (WMT - Free Report) , Target and Costco, to name a few.
It recently inaugurated its second Amazon Fresh store in New Jersey. It is also set to open another Amazon Fresh store in Virginia.
Amazon gears up to launch a smaller Whole Foods Market concept called Whole Foods Market Daily Shop in Manhattan.
Its introduction of the smart shopping cart, called Amazon Dash Cart, powered by advanced computer vision technology, to deliver an enhanced shopping experience to its in-store shoppers, is a plus.
The growing traction across Amazon Go, which is a cashierless store of the company, is a major positive.
Conclusion
Amazon’s near-term as well as long-term prospects are expected to benefit from strong retail strategies, which include bolstering its online and offline retail presence, distribution channels and delivery services. Also, expanding global presence and growing adoption of its Prime program remains a major positive.
This Zacks Rank #2 (Buy) company enjoys high market esteem, and savvy investors should consider leveraging AMZN’s potential for sustained long-term growth. It has an impressive long-term expected earnings growth rate of 29.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for 2024 revenues is pegged at $638.24 billion, which indicates a year-over-year increase of 11%. The consensus mark for 2024 earnings has been revised upward by 0.9% to $4.58 per share over the past 60 days. The figure indicates year-over-year growth of 57.9%.
EPS Movement Chart
Image Source: Zacks Investment Research
However, AMZN is trading at a premium with a forward 12-month P/S of 3.05X compared with the industry’s 1.65X and higher than the median of 2.49X, reflecting a stretched valuation. While this might be perceived as a risk, the premium is justified due to the company’s strong capabilities in various fields and high growth potential compared to traditional retailers.
AMZN’s P/S F12M Ratio Graph
Image Source: Zacks Investment Research